Agreement on Greek Crisis Could Be a Done Deal

The dollar is still kicking butt and taking names later, even with the awful durable goods orders print yesterday (more on that later).

The euro, which used to be the currency that led the currencies higher vs. the dollar, has now turned around and is leading them down the slippery slope. Not all of them, but you get the picture. The euro has not been able to find terra firma since hitting 1.14 early Monday morning.

You would think this wouldn’t be the case given that the “talk on the street” is that a deal is done with regards to an agreement on the Greek drama. But it is what it is. I guess, the markets will let the U.S. go “ollie, ollie, oxen free”, when they kick the can down the road, but not the Eurozone.

Hmmm… they are similar in size regarding their economy, and the Eurozone has the potential to add member countries, so their economy’s size going forward is only going to get larger.

Traders decided to throw fundamentals into the picture today, out of the blue, I might add, and mark down the euro for the weaker than expected business climate, which includes; current assessment, and expectations components, and is measured by the think tank IFO. The IFO print showed weakness in all three components with the Climate at 107.4 vs. 108.5 prior, Current 113.1 vs. 114.3 prior, and expectations 102 vs. 103.

Now I say that trades decided to throw fundamentals into the picture today, because they are using this IFO weakness to mark down the euro, but failed to mark up the euro when the IFO was moving higher these last 9 months. Reminds me of young teenagers, with their “selective hearing”.

On a sidebar — there’s an article on the Bloomberg this morning that caught my eye. It’s Marine Le Pen, the frontrunner in France’s 2017 Presidential Election who said:”A Greek exit from the euro is inevitable, and if it’s up to her, France won’t be far behind.” Oh boy, I can’t wait for this person to be in the news all the time. UGH!

The price of oil is back to $61 this morning, which has been about the top of the pricing range for the bubbling crude, black gold, Texas tea. The petrol currencies are taking notice, and attempting to carve out gains vs. the dollar this morning, nothing large to speak of, but gains nonetheless.

The thing we have to remember here is that the oil’s price has been stuck in this range of $58 to $62 for some time now, and when it falls back, so too do the petrol currencies. I wouldn’t get too lathered up on this, not until we see a break above $62.

The Chinese renminbi/yuan was weakened again last night, I would think it had mostly to do with dollar’s strong push yesterday against the other currencies and gold.

I had a question in the Pfennig Replies Box yesterday about was there a difference in trading between the renminbi and yuan? No there isn’t, as the renminbi is the official name of the currency of China, and the yuan is the slang name. Think: dollar/buck. I’ve always said that the media uses “yuan” because it’s easier to spell and pronounce! HA!

Speaking of China, I told you last week about a meeting that would take place between leaders of China and the U.S. and that they would have a full agenda to talk about, but have very little to agree on. That meeting is going on now. The IMF decided to throw a spanner in the works of the meeting by saying that, “a promotion of renminbi to Special Drawing Rights (SDR’s) may happen in 2015.”

On a sidebar with China. According to SWIFT, the people that secure and make all the foreign wire transfers in the world, the renminbi became the second most used currency in trade finance, and the fifth most popular payment currency. So, it does appear that China’s goal of achieving a wider distribution of their currency is gaining traction, folks.

The U.S. data cupboard was quite interesting yesterday, with May durable goods printing much worse than expected -1.8%, and April’s -0.5% was revised downward to -1.5%!

Now, there was a 29% drop in aircraft orders, which sort of skewed May’s negative print, but that’s really just the unwinding of the 5.1% increase in March that reflected a large aircraft orders number. So, I would take any excuse that the media or government makes for this negative 1.5% with a small grain of salt.

And the capital goods orders for May were only 0.4%, and were expected at 0.5%, but the real meat here was the revision from April’s 1% gain to a negative -0.3%!

How do you go from 1% to negative 0.3% in a revision?

Well, I’ll tell you how.

These things happen when you’re trying to pump up the numbers artificially, but when the receipts are all added up, you have to put your tail between your legs and admit your original number was just a bunch of B.S. !

And gold is down again this morning, and silver has dropped below $16 again. Wouldn’t you know it, of course that’s all I can say about that, but if you can read between the lines, you might feel my frustration!

I did see some new research material from gold researcher extraordinaire, Koos Jansen, the other day, showing that China continues to accumulate large sums of physical gold.

You longtime readers know that I believe China wants to back a portion of their currency, when they decide to float it, with gold. And this is where I’m going to share a quote with you from George Gilder who said, “Countries that tie their money to gold will always tend to outperform those who submit it to the currency bazaar.”

A couple of weeks ago, I said that I just didn’t get what was going on in Platinum and Palladium. New cars are flying out of the showrooms according to the sales data for new cars, of which every one of them has a catalytic converter.

But it’s not just car sales that I question. I told you a month or so that Platinum was in a deficit as far as production and demand was concerned. Now, when since the beginning of time didn’t a deficit in production with strong demand not bring about a rally in price?

Global platinum supplies will remain in a deficit for the second straight year in 2015 despite rising mine production as demand for automobile manufacturing and jewelry is set to rise, CPM Group said on Tuesday.

In its ‘Platinum Group Metals Yearbook 2015’, CPM Group forecast a global 2015 platinum deficit of 215,000 troy ounces compared with a deficit of 981,000 ounces in 2014.

Platinum fabrication demand, which involves using the precious metal in automobiles, jewelry and electronics, was forecast to reach 7.18 million troy ounces this year, up 2.2 percent from 2014 but below the 7.22 million ounces of 2013.

Chuck again. I just shake my head in disgust with the way these things get manipulated. But one day, Alice!

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About Chuck Butler:

Chuck Butler is the Managing Director EverBank Global Markets. The father of the Daily Pfennig® newsletter, Chuck has a career in investment services and currencies spanning 35+ years. His tacit knowledge of the global markets along with his inventive spirit has led to the creation of many distinct and innovative currency-based products. A respected analyst of the currency market, Chuck has made frequent appearances on MarketWatch, USAToday, CNNfn, Bloomberg Television, and CNBC as well as quoted in The Wall Street Journal, US News & World Report, and The Chicago Tribune.